Archive for August, 2018
For lenders and financial institutions, a credit score is a good indicator of an individual’s financial responsibility. If your credit score is poor, this can make it harder for you to get financing for a car, a personal loan, or a mortgage. However, there are simple steps you can take to make sure your credit score is impeccable.
Follow the tips below and watch your credit score go from poor to excellent:
#1 – Check Credit Reports for Accuracy
Before you start paying off debts that are on your credit report, make sure those accounts actually belong to you. It’s possible that an account that does not belong to you has shown up in your report. To ensure accuracy, check each account and charges. If you don’t recognize one of the accounts, contact the lender directly. All you need to do is prove your identity and that account should be erased from your report. Once you have all your accounts in order, you can move on to the next step.
#2 – Clear Up Collection Accounts
Old debts can be easy to forget if you haven’t checked your credit report in a while. That old phone bill from college can come back to haunt you when you’re trying to buy your first home. Take a look at the debts that have been sent to collections. Call the collectors directly. If you can’t pay in full, ask if you can set up a payment plan that works for your budget. Your credit score will increase significantly once you lower your balance and settle old debts.
#3 – Get a Secured Credit Card
A great way to increase your credit score without much effort is getting a credit card. However, if you have a tendency to overspend, a secured credit card can give you a smaller line of credit that is easier to handle. Your credit line with a secured credit card will often depend on the deposit you provide. If you feel like $200 is a manageable line of credit, use that amount for your deposit. Plus, secured credit cards are designed for people who are trying to improve their credit. If your credit score is less than stellar, you may still have a chance of getting approved.
#4 – Pay Bills On Time
One of the best and easiest ways to show that you are financially responsible is paying your bills on time. If you usually pay your bills days or weeks after they’re due, it may affect your credit score. Take a look at your monthly bills and see if any service providers will allow you to set up auto-pay. This way, you won’t have to keep up with your bills and the money will be deducted from your account automatically each month.
#5 – Keep An Eye On Your Credit Utilization Ratio
Paying off your credit card balance on time is important, but keeping an eye on your credit utilization ratio can save you from losing points on your credit score. Ideally, you should keep your debt-to-credit ratio under 30%. You should also avoid closing any unused credit card accounts. This will affect your utilization ration percentage and would do more harm than good. However, if you do decide to close any consumer credit accounts, make sure you maintain a 15% utilization percentage without having that credit card.
Following the tips above will get you on your way to a better credit score and teach you invaluable lessons about personal finance. Good luck on your journey to a perfect credit score!